Interest rate with annuity. What are you getting in terms of interest rate if you are...
Question 5 [4 points] Suppose the interest rate is 5%. You inherit a trust (a perpetuity) that will eventually pay you $10,000 a year forever. You will receive the first $10,000 payment exactly three years from today. What is the trust worth at the moment you start collecting payments (i.e. in three years from today) [1 point] What is the trust worth today? [1.5 points] A bank offers to exchange your trust for another stream of yearly payments that also...
Question 5 [4 points] Suppose the interest rate is 5%. You inherit a trust (a perpetuity) that will eventually pay you $10,000 a year forever. You will receive the first $10,000 payment exactly three years from today. a. What is the trust worth at the moment you start collecting payments (i.e. in three years from today) (1 point] b. What is the trust worth today? (1.5 points c. A bank offers to exchange your trust for another stream of yearly...
Annuity A makes annual payments of $813.73 for each of the next 10 years, while annuity B makes annual payments of $500 per year forever. At what interest rate would you be indifferent between the two? At interest rates above/below this break-even rate, which annuity would you choose?
Annuity A makes annual payments of $813.73 for each of the next 10 years, while annuity B makes annual payments of $500 per year forever. At what interest rate would you be indifferent between the two? At interest rates above/below this break-even rate, which annuity would you choose?
(2 points) Juan purchases an annuity for 4980 dollars that will make 18 annual payments, the first to come in one year. If the effective rate of interest is 8.6 percent, how much is each annual payment? Answer dollars. We were unable to transcribe this image(1 point) You start with 300 items. How many do you have after a 46% increase followed by a 46% decrease? You will have tems. (Do not round your answer) help (numbers) (2 points) How...
9. You are offered an investment with a quoted annual interest rate of 6.75% with quarterly compounding of interest. What is your effective annual interest rate? 10. You are offered an annuity that will pay $15,000 per year for 20 years (the first payment will occur one year from today). If you feel that the appropriate discount rate is 3%, what is the annuity worth to you today? 11. If you deposit $6,500 per year (each deposit is made at...
7. Present value of annuities and annuity payments The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the end of each year...
Lottery. Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the $4,000,000 advertised jackpot. You can take annual payments of $80,000 at the end of the year for the next 50 years or $978,679 today. a. If your investment rate over the next 50 years is 10%, which payoff will you choose? b. If your investment rate over the next 50 years is 7%,...
Problem 5-36 Annuity Interest Rate (LG5-8) What annual interest rate would you need to earn if you wanted a $600 per month contribution to grow to $52,500 in six years? (Do not round Intermediate calculations and round your final answer to 2 decimal places.) eBook Annual interest rate
PART 1: The present value of an ordinary annuity is $13,000. What would be the present value of this annuity if the payments were to be received at the beginning of each period? Assume the interest rate is 18%. A. $16,500 B. $13,636 C. $15,340 D. Insufficient information to determine – we need to know the specific cash flows and the timing PART 2: If you were offered a stream of cash flows of $1500 per year forever and the...